Westside Ventures, Ltd. v. Houston Community College System

UNITED STATES DISTRICT COURT March 29, 2024

SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk

HOUSTON DIVISION

WESTSIDE VENTURES, LTD., §

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Plaintiff, §

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v. § Civil Action No. 4:19-CV-02928

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HOUSTON COMMUNITY COLLEGE §

SYSTEM DISTRICT, §

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Defendant. §

MEMORANDUM OPINION AND ORDER

This is a case about deed restrictions. In 2019, Defendant Houston Community

College System District (“HCC”) purchased land whose use was previously restricted by

Plaintiff Westside Ventures, Ltd. (“Westside”) in the interest of building a development.

In October 2021, Judge Lynn Hughes denied HCC’s 12(b)(1) Motion to Dismiss, (Dkt. No.

5), and Westside’s Motion for Partial Summary Judgment on Inverse Condemnation

Liability, (Dkt. No. 33). (See Dkt. Nos. 42, 43). HCC now asks this Court to reconsider

Judge Hughes’s decisions or, alternatively, to certify the two issues for interlocutory

appeal. (Dkt. No. 63). The Court declines.

Pending before the Court is Houston Community College System’s Motion for

Reconsideration or, Alternatively, Certification of an Interlocutory Appeal, (Dkt. No. 63).

For the following reasons, the Court DENIES the Motion.

I. BACKGROUND1

The land at issue was originally purchased by Westside in the 1990s for

development purposes. (Dkt. No. 65 at 2). Westside sold the land to a third party with a

deed restriction requiring single-family or specific office use. (Id.). In 2019, HCC

purchased the land from the third party without discussion of any deed restrictions.

(Dkt. No. 63 at 8–9). According to the third-party deed, the restrictions are covenants

running with the land, binding on successors and assigns. (Dkt. No. 33 at 2). Before

selling the land to HCC, the third party unsuccessfully attempted to negotiate a removal

of the restrictions with Westside, who had initially imposed the restrictions. (Id.); (Dkt.

No. 65 at 3). When HCC purchased the land from the third party, the purchase contract

included a provision providing HCC with a $300,000 credit “remedying existing

conditions and contingencies” on the property. (Dkt. No. 6 at 3 n.2). Soon thereafter,

HCC began constructing a campus on the property and Westside sued for violation of

the deed restriction. (Dkt. No. 63 at 9).

In 2019, HCC filed a Rule 12(b)(1) Motion to Dismiss, (Dkt. No. 5), and in 2021,

Westside filed a Motion for Partial Summary Judgment on Inverse Condemnation

Liability, (Dkt. No. 33). On October 7, 2021, Judge Hughes denied the Motion to Dismiss,

finding that HCC is not immune from suit and that Westside “has adequately pleaded a

compensable property interest in the deed restrictions[.]” (Dkt. No. 42 at 2). On the same

day, Judge Hughes issued an Opinion on Partial Summary Judgment as to HCC’s inverse

1 The Court makes these findings solely for the purposes of this Order.

condemnation liability, holding that the “deed restriction is compensable property” and,

therefore, HCC’s violation of the deed restriction “is a taking that requires

compensation[.]” (Dkt. No. 43 at 4–5). HCC asks the Court to reconsider and reverse

both orders under Rule 54(b). (Dkt. No. 63 at 11). Alternatively, HCC requests that the

Court certify the two issues—immunity and inverse condemnation liability—for

interlocutory appeal. (Id. at 24–25).

II. LEGAL STANDARD

A. RECONSIDERATION

“Under Rule 54(b), the trial court is free to reconsider and reverse its decision for

any reason it deems sufficient, even in the absence of new evidence or an intervening

change in or clarification of the substantive law.” Six Dimensions, Inc. v. Perficient, Inc.,

969 F.3d 219, 227 (5th Cir. 2020) (quoting Austin v. Kroger Tex., L.P., 864 F.3d 326, 336 (5th

Cir. 2017) (per curiam)); see also Fed. R. Civ. P. 54(b) (“[A]ny order . . . that adjudicates

fewer than all the claims or the rights and liabilities of fewer than all the parties does not

end the action as to any of the claims or parties and may be revised at any time before the

entry of a judgment[.]”). A district court has discretion to deny motions for

reconsideration and only “abuses its discretion when its ruling is based on an erroneous

view of the law or a clearly erroneous assessment of the evidence.” Austin, 864 F.3d at

329 (quoting United States v. Yanez Sosa, 513 F.3d 194, 200 (5th Cir. 2008)).

B. INTERLOCUTORY APPEAL

Section 1292(b) authorizes a district judge to certify an order for interlocutory

appeal when the “order involves [(1)] a controlling question of law [(2)] as to which there

is substantial ground for difference of opinion and [(3)] an immediate appeal from the

order may materially advance the ultimate termination of the litigation[.]” 28 U.S.C.

§ 1292(b); see also Swint v. Chambers Cnty. Comm’n, 514 U.S. 35, 46, 115 S.Ct. 1203, 1210, 131

L.Ed.2d 60 (1995). Unless all three criteria are satisfied, a court cannot certify an

interlocutory appeal. See Clark-Dietz & Assocs.-Eng’rs, Inc. v. Basic Constr. Co., 702 F.2d 67,

68–69 (5th Cir. 1983). The moving party bears the burden of demonstrating the necessity

of an interlocutory appeal. Coates v. Brazoria Cnty. Tex., 919 F.Supp.2d 863, 867 (S.D. Tex.

2013). The Fifth Circuit has noted that “Section 1292(b) appeals are exceptional.” Clark-

Dietz, 702 F.2d at 69. That is because Section 1292(b) “is not a vehicle to question the

correctness of a district court’s ruling or to obtain a second, more favorable opinion.”

Ryan v. Flowserve Corp., 444 F.Supp.2d 718, 722 (N.D. Tex. 2006).

III. DISCUSSION

In its Motion, HCC argues that reconsideration or interlocutory appeal are

warranted for two reasons. (See Dkt. No. 63 at 12–19). First, HCC argues that because it

is a college, governmental immunity bars this suit. (Id. at 12–13). Second, HCC argues

that Westside’s claim “does not fall within the scope of an inverse condemnation claim

under the takings clause because deed restrictions . . . are not, themselves, compensable

property interests[.]” (Id. at 10); (see also id. at 13–19); (Dkt. No. 66 at 3–4). In response,

Westside argues that HCC relies on faulty caselaw, properly distinguished in Judge

Hughes’s previous orders. (Dkt. No. 65 at 1–2).

A. SOVEREIGN IMMUNITY

“A municipal government enjoys immunity from suit unless its immunity has

been waived.” City of Houston v. Carlson, 451 S.W.3d 828, 830 (Tex. 2014) (citing Reata

Constr. Corp. v. City of Dallas, 197 S.W.3d 371, 374 (Tex. 2006)). “A statutory waiver of

immunity is unnecessary for a takings claim because the Texas Constitution waives

‘governmental immunity for the taking, damaging or destruction of property for public

use.’” El Dorado Land Co., L.P. v. City of McKinney, 395 S.W.3d 798, 801 (Tex. 2013) (quoting

Steele v. City of Houston, 603 S.W.2d 786, 791 (Tex. 1980)).

Inverse-condemnation claims, such as the one here, are one type of takings claim.

See Carlson, 451 S.W.3d at 831. “A taking is the acquisition, damage, or destruction of

property via physical or regulatory means.” Id. “The action is termed ‘inverse’ because

it is initiated by the private property owner instead of the government, but its purpose

and procedure are generally no different.” El Dorado, 395 S.W.3d at 804 (quoting City of

Dallas v. Stewart, 361 S.W.3d 562, 567 (Tex. 2012)). Accordingly, governmental immunity

is waived in this case with respect to Westside’s inverse-condemnation claims. See

Carlson, 451 S.W.3d at 830; see also City of Friendswood v. Horn, 489 S.W.3d 515, 524 (Tex.

App.—Houston [1st Dist.] 2016, no pet.) (finding that the City “does not have immunity

from a valid takings claim”). The order denying dismissal of Westside’s claims correctly

recognized that HCC is not immune from suit. (See Dkt. No. 42 at 1–2). Additionally,

because this is a well-established area of law without substantial ground for

disagreement, HCC has not shown that Judge Hughes’s order warrants certification for

interlocutory appeal. (See Dkt. No. 63 at 24–25).

B. INVERSE CONDEMNATION CLAIM

“To plead inverse condemnation, a plaintiff must allege an intentional

government act that resulted in the uncompensated taking of private property.” Carlson,

451 S.W.3d at 831. The government’s alleged action can constitute a taking if it “denies

the [owners] the use of their property, renders it valueless, or unreasonably interferes

with their right to use and enjoy the property.” Horn, 489 S.W.3d at 525 (citing Sheffield

Dev. Co. v. City of Glenn Heights, 140 S.W.3d 660, 671–73 (Tex. 2004)). The government’s

alleged action must also be a compensable taking. Jim Olive Photography v. Univ. of Hous.

Sys., 624 S.W.3d 764, 771 (Tex. 2021) (“Governments interfere with private property rights

every day. Some of those intrusions are compensable; most are not.”), cert. denied, ____

U.S. ____, 142 S.Ct. 1361 (Mem.), 212 L.Ed.2d 322 (2022).

Whether a compensable property interest exists depends on state law. See United

States v. 0.073 Acres of Land, 705 F.3d 540, 544 (5th Cir. 2013) (per curiam). Texas courts

agree that “the restriction on the use of property . . . is a property right for which

compensation may be recovered.” City of Heath v. Duncan, 152 S.W.3d 147, 152 (Tex.

App.—Dallas 2004, pet. denied) (finding a negative easement constituted a property right

requiring compensation); see also Horn, 489 S.W.3d at 526 (finding that the City’s

unilateral violation of a negative deed restriction on land use can “comprise a property

interest held by the homeowners because they are in the nature of covenants that run

with the land”); Harris Cnty. Flood Control Dist. v. Glenbrook Patiohome Owners Ass’n, 933

S.W.2d 570, 576 (Tex. App.—Houston [1st Dist.] 1996, writ denied).

HCC’s reliance on the holding in City of Houston v. Wynne, 279 S.W. 916

(Tex.Civ.App.—Galveston 1925), writ ref’d per curiam, 115 Tex. 255, 281 S.W. 544 (1926), is

misplaced and not “helpful to this case” because Wynne was decided before “real

covenants had [] been recognized in Texas as a property interest.” Harris Cnty. Flood, 933

S.W.2d at 576; see also City of Houston v. McCarthy, 464 S.W.2d 381, 387 (Tex. App.—

Houston [1st Dist.] 1971, writ ref’d n.r.e.) (finding that plaintiffs can recover for

“diminished [property] value by reason of the extinguishment of [a] negative easement”).

In this case, Westside has sufficiently pleaded a compensable property interest—

namely, its interest in the property’s use restrictions, which are restrictions running with

the land, binding on successors and assigns. (Dkt. No. 33 at 2). Despite HCC’s assertion

that it “has identified an abundance of authority contrary to the Court’s order,” the

relevant and controlling authority on the question compels this finding. (See Dkt. No. 63

at 25); (Dkt. No. 66 at 4–11). Accordingly, the previous order is not in error, (see Dkt. No.

43 at 2–4), and HCC has failed to show that an interlocutory appeal under Section 1292(b)

is warranted because this is a well-established area of law without substantial ground for

disagreement.

IV. CONCLUSION

For the foregoing reasons, the Court DENIES Houston Community College

System’s Motion for Reconsideration or, Alternatively, Certification of an Interlocutory

Appeal, (Dkt. No. 63).

It is SO ORDERED.

Signed on March 29, 2024.

DREW B. TIPTON

UNITED STATES DISTRICT JUDGE